Lower commodity prices have cast a different light on current cropland leasing agreements. And farmer/tenants may be re-evaluating their leases.
Michael Taylor, an agricultural economist a Kansas State University, says there are several things to think about before you walk away from your cash-rent agreement.
“Number one, they've made that decision to get that land, to pay for that land,” Taylor said. “And they've made all their machinery and other decisions based on having that land and putting it into operation. So, if they pull that out and they cut down on their acres, that changes their entire cost structure and their unable to take costs like machinery and spread it out over many acres. It's a really tough decision for them to make.”
Taylor says, before making the leap to leave your land, consider not only production costs, but also where you see crops prices going in the future.
“If they think that they crop price situation right now, which is not very good, is a short-run phenomenon, and they can make sure they've got enough working capital to get through the next year or two,” Taylor said, “then that's something that can keep them from having to let go of that lease and they can still maintain their operation size.”
For more information, Taylor encourages you to visit www.AgManager.info.